Ottawa-Gatineau set for two big years of economic growth: Conference Board

Thanks to a federal hiring spree, millions of tourists flocking to Canada 150 celebrations and an LRT-fuelled construction boom, Ottawa-Gatineau’s economy is set to enjoy its best two-year stretch in the past decade in 2017-18, the Conference Board of Canada says.

In its latest metropolitan outlook published Tuesday, the agency is forecasting the region’s GDP to jump by 2.5 per cent this year and another 2.2 per cent in 2018, the biggest back-to-back increases since 2007-08.

Ottawa-Gatineau’s economy is expected to create an average of 9,100 new jobs this year and next, the Conference Board said, a significant boost from the five-year annual average of 5,900. That growth is expected to push the unemployment rate down from 6.5 per cent in 2016 to 6.1 per cent by 2018.

The agency attributes much of the upswing to an expanding public administration sector, which is expected to add up to 10,000 jobs between 2016 and 2018.

“A big increase in federal government spending has been accompanied by a significant upswing in local public service hiring,” the report said. “Following several years of cutbacks, public administration employment has increased strongly since 2016.”

While federal government spending increased 0.6 per cent a year from 2011-15 as the feds focused on balancing their books, those numbers are expected to surge to 3.6 per cent from 2016-18 thanks largely to new infrastructure spending, the Conference Board says.

The agency said the feds will likely continue to boost their payroll through 2021, though it did add a caveat to that prediction.

“However, there is downside risk to this outlook, as high budget deficits may require greater spending restraint over the medium term, thus limiting job gains in the federal public service,” the report reads.

But an uptick in federal hiring was far from the only source of optimism for Ottawa-Gatineau’s economy, the Conference Board said.

Construction boom

The board also had good news on the construction front. That sector is on track to grow by three per cent in 2017 and a further 2.3 per cent next year, powered by projects such as the $1.2-billion light-rail line slated for completion in 2018 and a rebound in housing starts. The board noted a number of other major construction efforts are on the horizon, including the $860-million renovation of Parliament Hill’s West Block and the $219-million makeover of the Government Conference Centre across the street.

“The industry continues to reap the rewards of large infrastructure investment projects being undertaken by all levels of government, a trend that is expected to continue for many years to come,” the report said.

“Not to be outdone, the residential side of the market is also adding to growth this year, with the healthy economic climate boosting the demand for homes,” the Conference Board added, noting housing starts are expected to jump more than 10 per cent in 2017 to a four-year high of 7,830 units.

Robust job growth has fuelled a retail boom as well, the report said, pointing to “vigorous gains in household spending over the past two years” in Ottawa-Gatineau. Retail spending is expected to rise by more than five per cent for the second straight year in 2017, the agency added.

However, the board sounded a note of caution on the retail front, noting a hike in interest rates could throw cold water on the sizzling sector as households look to cut back on discretionary spending in favour of paying down debt. It predicted retail spending growth will slow dramatically to just 2.4 per cent next year.

Finally, the report also trumpeted gains in the region’s second-largest industry, high-tech, noting the sector “continues to grow and diversify in other areas besides telecommunications.”

Shopify’s continued expansion and the emergence of the region as a hub for autonomous vehicle research and development are positive signs, the Conference Board wrote. Its forecast calls for Ottawa-Gatineau’s business services output, which includes the tech sector, to grow by 1.9 per cent in 2017 and another 2.9 per cent next year.